Bega Cheese plans to use
Commonwealth Bank of Australia
’s 1000 branches across the country to spearhead its $350 million to $400 million initial public offering, which represents Australia’s biggest “mum and dad" float since
QR National
listed in November last year.

The float of the southern hemisphere’s biggest cheese-cutting and packing company was hotly contested as stockbrokers jostled to gain one of the few sizeable offerings to emerge from this year’s mergers and acquisitions activity.

Bega, which has been advised by boutique investment bank Kidder Williams, appointed CBA yesterday, signalling its intent to sell its story to retail investors who will see Bega prospectuses on the counters of CBA’s branches – of which 351 are in country or regional Australia.

The broker will also target the 2 million customers that trade securities through its online broking platform CommSec.

AFR
AFR

Bega is expected to lodge its prospectus with the Australian Securities and Investments Commission within three weeks, ahead of the company’s float in early July, which offers investors increasingly rare market exposure to the soft commodities boom.

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QR National struggled to win retail support but Bega is confident its brand strength – it is the country’s biggest selling cheese – and its attractive position within the dairy industry will find favour with investors.

In the past few years, the number of Australian listed agricultural companies has been dwindling as deep-pocketed foreigners snap up assets on the doorstep to an increasingly hungry Asia, the most recent being Agrium’s $1.7 billion purchase of the nation’s biggest wheat exporter and rural services group, AWB.

While final pricing is not yet known, the float is poised to turn about 100 of Bega’s 150 farmer and former farmer owners into overnight millionaires.

Analysts expect the group will raise $35 million in new capital that would value the company about $400 million, leapfrogging ­Warrnambool Cheese & Butter Factory as Australia’s biggest listed dairy company.

Bega, which is the biggest exporter of cream cheese to Japan, has put in place tough shareholder restrictions designed to prevent a full-blown ­takeover for at least five years.

Ownership is restricted to 5 per cent for the first two years, increasing to 10 per cent for a following three years. Five years from listing, shareholders will decide whether to lift the cap to 15 per cent or remove it entirely.

Bega chairman
Barry Irvin
said the float proceeds would be applied to Bega’s $80 million debt, allowing it to capitalise on acquisitions or expansion opportunities from the inevitable rationalisation within the dairy industry in the years ahead.

“We don’t necessarily have anything on our agenda but we can see that there are opportunities that we think will flow in the next year or two," Mr Irvin said.

“I think the strength of the company is that we have a history of positioning ourselves early for whatever event might occur. There is no point talking about restructuring when the event arrives. We wanted to be ahead of the game."

Bega has grown from a small ­farming co-operative producing 80,000 tonnes of cheese to a multi-site processing group producing 200,000 tonnes of dairy products including milk powder and infant formula, including cutting and packaging for New Zealand dairy giant Fonterra.

Mr Irvin said Bega was well placed to take advantage of supply chain rationalisation as producers moved to reduce costs in the face of a higher Australian dollar.

“I think there is really sensible ­supply chain rationalisation that will occur in the industry," Mr Irvin said.

“For the industry to be competitive globally it has to happen. You have to find ways to take costs out of the supply chain if you want to play on the world stage."

Analysts have speculated ­Warrnambool Cheese will be the subject of corporate activity when a cap restricting share ownership to 15 per cent is lifted today. Bega became Warrnambool Cheese’s white knight last year, taking a 15 per cent stake as the dairy processor defended itself against advances by dairy co-operative Murray Goulburn.

Mr Irvin has said a takeover of Warrnambool was not on its agenda but Bega wanted a seat at the negotiating table should rationalisation occur.